The eradication of extreme poverty remains an intractable global challenge. This paper explores social innovation (SI) as a strategy for fostering sustainable poverty reduction in a developing country, Nigeria. Analysis is based on semi‐structured interviews with founders of SI initiatives. Findings indicate SI as a sustainable poverty reduction strategy because it addresses: (i) some underlying causes of poverty such as poor nutrition and lack of access to education; (ii) different dimensions of sustainability (i.e., economic, social and environmental). The study also identifies socially innovative cultural practices such as traditional rotational saving/credit and apprenticeship schemes which help eradicate poverty by ensuring improved access to finance and encouraging entrepreneurship. Furthermore, results indicate local SI initiatives in Nigeria are largely private sector‐led, while a weak institutional environment hampers expansion. The study highlights the need for policy aimed at identifying, strengthening and scaling up innovative local practices, and creating favourable framework conditions for SI.